Businesses led by women and minorities have long lagged in the
race for venture capital-and this past year was no different. In
2003, women led companies accounted for a scant 4.2 percent of all
VC dollars, according to a 2004 report from Growthink Research in
Los Angeles and Re:invention Inc. in Chicago. Similar numbers are
not even available for minority-owned businesses, though experts
estimate that they grabbed an equally small slice of the venture
pie.

But in the microcosmic world of VC education, an interesting
shift is taking place that may change those stats in coming years.
The latest class of the Kauffman Fellows Program, an educational
program based in Shawnee Mission, Kansas, that's designed to
educate and train future VCs and leaders of high-growth companies,
is the most diverse to date. Of the 14 fellows, eight are
minorities: two are black, five are Asian, and one has a
Middle-Eastern background. Three of the fellows are women.

True, it's a small sample size. But Trish Costello, CEO of
the Center for Venture Education, which runs the Kauffman Fellows
Program, points out that when the program began 10 years ago,
"there were so few African Americans in venture capital, it
was within the percentage of error-so from a research standpoint,
you couldn't really count it." Today, the Kauffman Program
alone can claim six black VC general partners as former program
fellows. Costello adds that the number of "general
minorities"-or nonwhites-in the VC arena has risen
dramatically over the past few years because of a more global
focus. "You're seeing a much higher number now because of
the rapidly increasing [number of] Asian and Indian VCs who are
doing a bang-up job," she says.

Amal Johnson, venture partner with ComVentures in Palo Alto,
California, reports seeing more women among her peers and chalks
that up to more women in senior positions in corporate America, as
well as in engineering and business schools. "That's the
pipeline that feeds [the VC industry]," she says. "So
it's natural to have this spillover to the venture business,
which always looks for talent to help grow and invest in young
companies."

The question is, As more women and minorities enter the VC
arena, will that mean more capital for women- and minority-owned
businesses? Costello says it's too soon to tell, and Johnson is
quick to point out that VCs should be blind to gender, race and
ethnicity-neither excluding entrepreneurs, nor favoring them
because of those factors. But in the cutthroat, competitive world
of VC, networking is everything-and both women and minorities have
had trouble cracking the classically Caucasian old boys'
networks that tend to foster deal making.

"I always used to say the bottom line has no gender, but if
you can't get in the door, you're not going to get to the
bottom line," says Kay Koplovitz, co-founder of two New York
City-based companies, including Springboard Enterprises, a
nonprofit organization dedicated to helping women-led businesses
gain visibility and access to capital markets. "So it's
really about human capital."

Koplovitz, also founder of USA Networks, notes that both men and
women can open doors for female CEOs, but, generally, women VCs
have played that role for Springboard companies. ComVentures'
Johnson admits she feels some obligation to play a mentoring role.
"So many people have extended a hand for me to get to where I
am, I ought to do the same," she says. "For young women,
I'd probably go the extra mile."

Ultimately, of course, only dollars and cents will motivate VCs
to change the complexion of their portfolio companies. And Costello
says that as successful minority- and women-led businesses gain
more visibility, VCs will start to see diversity as a key part of
their strategies. "When VCs start realizing they're
missing tremendous opportunities to make money, and that
they're not in the right networks," she says, "they
will actively change that."